Nigeria: PMI reaches 18-month high in July
Business conditions in Nigeria’s private sector economy continued to improve at the outset of the third quarter, with the Stanbic IBTC Nigeria Purchasing Managers’ Index (PMI) rising to an 18-month high of 55.4 in July from 53.6 in June. As such, the index moved further above the neutral 50-threshold that separates expansion from contraction in operating conditions.
The uptick in the headline reading came on the back of firming demand dynamics, with new orders rising at the strongest pace in one-and-a-half years. This resulted in the joint-quickest expansion in output in nearly a year. As firms faced greater output requirements, purchasing activity was scaled up, while greater anticipated demand buoyed stockpiling. To keep up with increased demand, firms continued to onboard staff. Turning to prices, material shortages drove up input costs, which was further fueled by greater transportation and staff costs. Output charges rose at a stronger rate, partly due to improved demand dynamics allowing firms to raise their selling prices. Business sentiment, lastly, moderated to the fourth-lowest level in the series’ history, but remained positive.
Muyiwa Oni, head of equity research West Africa at Stanbic IBTC Bank, commented:
““The private sector business environment continued to show steady improvement […] However, likely restrictions due to rising covid-19 cases causes concerns of a third wave which remains a downside risk to economic recovery and our growth projections of 3.1% y/y this year. Inflation continues to remain high and as the recent PMI series suggests, both input and output prices have been on the rise. This potentially could impact the recovery in aggregate demand and purchasing power of the consumer, considering sticky wages.”